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Glossary: Economics
New terms will be added as they become relevant to coursework or previous classes in order to keep these pages convenient for study. A *Absolute advantage - a condition where a country can produce an equal amount of a good with less resources than another *Aggregate demand - the total quantity of goods and services demanded in a country at a given price level and time period *Aggregate supply - the total quantity produced of goods and services produced in a country at a given price level and time period *Allocative efficiency - the use of resources that returns the highest possible value; pareto efficiency *Asymmetric information - a situation where one party has more information than the other *Automatic stabilizer - a policy mechanism that serves to offset some effects of current economic trends without government intervention *Average fixed costs - total fixed costs divided by the number of units produced B *Bankruptcy - a financial state where a business is unable to meet its debts *Barriers to entry - factors which inhibit the introduction of competitive entities in a market *Barter - a system where goods and services are exchanged for other goods and services of roughly similar value *Birth rate - the number of births per thousand people in a country *Black market - hidden economic activity due to its illegal nature *Budget - allocation of funds *Budget surplus/deficit - the difference between government revenue and expenditure. If revenue exceeds expenditure, the government is running a surplus. If expenditure exceeds revenue, the government is running a deficit *Business cycle - the periodic fluctuations in economic activity measured by changes in the GDP and other macroeconomic variables C *Capital - any factor of production that is manmade *Capitalism - an economic system where factors of production are privately controlled by individuals *Cartel - a collusive entity between producers to limit supply in order to artificially raise prices *Central bank - the head financial institution of a country responsible for deciding and executing monetary policy and the supervision of commercial banks *Ceteris paribus - the assumption in economic theory that all other factors are held constant *Collective bargaining - the ability of workers in a union to request better treatment as a group *Command economy - an economic system where the factors of production (the commanding heights) and makes decisions about their allocation and the management of other macroeconomic concepts *Comparative advantage - a condition where a country has a lower opportunity cost of producing a particular good over another country *Competition policy - laws which forbid anti-competitive practices; also known as antitrust laws *Complement - a product which works in tandem with another and thus is affected by changes in the other's price *Composite index - a measurement consisting of multiple economic indicators *Consumption - the process of using up goods and services *Cost-push inflation - inflation that stems from the prices of the factors of production increasing *Crowding in - the tendency for expansionary fiscal policy to increase investment *Crowding out - the tendency for government purchases to raise interest rates, ironically deterring investment D *Deflation - a sustained decrease in the average price level *Demand - the relationship between the quantity demanded of a good and its price *Demand-pull inflation - inflation that stems from an increase in demand outpacing producers' ability to supply *Deregulation - the easening of government restrictions E *Economic good - any good that is scarce *Economic growth - an increase in an economy's real level of output over time *Economic development - an improvement in the quality of life in a country *Economic profit - the difference between total revenues and costs *Economic system - the methods by which the questions of production are solved *Economics - the science of satisfying unlimited wants with limited resources *Economies of scale - the concept that increasing the output of a factory decreases the individual cost of production *Elasticity - the measure of the responsiveness of one variable to a change in another *Equilibrium - the point where the supply curve and demand curve intersect *Exports - goods and services sold to another country *Externality - an effect whose benefits and/or costs are borne by an unexpectant third party F *Factor market - the market for the factors of production *Factors of production - the inputs of production; land, labour, capital, entrepreneurship *Firm - an entity that purchases factors of production for the purpose of making a profit *Free enterprise - a system where private firms are able to obtain resources and do with them what they please *Free market - a market completely controlled by supply and demand *Frictional unemployment - temporary unemployment caused by people in between jobs and new entrants to the job market G *GDP - the sum of the value of all goods and services produced in a country's borders; gross domestic product *GNI - the sum of the value of all goods and services produced anywhere in the world by a domestic entity; gross national income I *Income effect - the positive correlation between demand and income *Inferior good - a good whose demand is inversely related to the income of a consumer *Inflation - an average increase in the price level *Injections - expenditures not originating in the household sector; includes government expenditure, foreign investment, and exports *Interest - the cost of a loan *Investment - expenditure intended to generate returns K *Keynesian - a person who regards the economy as inherently unstable and requiring constant oversight from the government *Leakages - the opposite of injections; parts of national income not used for consumption such as taxes, imports, and savings *LDC - a less developed country M *Macroeconomics - the study of broad economies and how to manage issues such as unemployment, monetary policy, and growth *Microeconomics - the study of the economic behaviour of individual people, firms, and markets and how prices are determined *Monetary policy - decisions affecting the money supply designed to influence the interest rate *Money - a medium of exchange *Monopoly - a market where there is only one producer N *Natural rate of unemployment - the unemployment rate when the country has achieved full employment. *Natural resources - factors of production which are not manmade *Non-price competition - differentiation of products based on factors other than price *Normal good - a good whose demand is proportional to income O *Oligopoly - a market characterized by few suppliers *Opportunity cost - the value of the next best alternative forgone P *Perfectly elastic demand - a demand curve with an elasticity of infinity; Qd becomes zero if there is any change in price *Perfectly elastic supply - a supply curve with an elasticity of infinity; Qs becomes zero if there is any change in price *Perfectly inelastic demand - a demand curve with an elasticity of zero; Qd does not change at all with price *Perfectly inelastic supply - a supply curve with an elasticity of zero; Qs does not change at all with price *Phillips curve - the inverse relationship between unemployment and inflation *Price control - government regulation on prices *Price elasticity of demand - the responsiveness of quantity demanded to price *Price elasticity of supply - the responsivenes of quantity supplied to price *Production - the conversion of raw materials into goods and services *Production possibility frontier (PPF) - the curve detailing all possible scenarios given full employment of LLCE *Progressive income tax - income tax where higher earners pay proportionally more *Purchasing power parity (PPP) - the situation where money has equal value across countries Q *Quantity demanded - the amount of a good or service that consumers are willing and able to purchase at a given price *Quantity supplied - the amount of a good or service that producers are willing and able to sell at a given price *Quota - a restriction on the quantity of a good a firm is allowed to sell R *Recession - a decline in the GDP for two consecutive quarters *Regressive income tax - income tax where lower earners pay proportionally more *Rent - the cost of using land S *Seasonal unemployment - unemployment based on seasonal changes; e.g. snow plow drivers being unemployed in the summer *Stagflation - a situation where both unemployment and inflation are high *Subsidy - a payment per unit produced to producers from the government *Substitutes - a good or service that can replace another *Supply - the relationship between quantity supplied and price at all prices *Sustainable growth/development - economic growth that meets the needs of the present generation without compromising the needs of the future U *Unemployment - the number of adult workers without jobs while actively seeking one *Utility - satisfaction derived from the use of a product Category:Economics